With demand for its jeans on the decline, Levi Strauss & Co. on Monday said it will close 11 plants in four states and lay off nearly 6,400 production employees.
The world’s largest brand-name apparel maker said the job cuts will reduce its total manufacturing work force in the U.S. and Canada by 34%--about the same percentage the company was overproducing for the U.S. market.
“In the 1960s, ‘70s and ‘80s, we were chasing demand and couldn’t produce fast enough,” company spokesman Gavin Power said. “It’s not like that anymore.”
For one thing, technology lets the company produce more clothes with fewer people. But demand for clothing has also dropped--with consumer spending on apparel down from 7% of the average income in the 1980s to 4% in the 1990s, Power said.
The closely held, San Francisco-based company had 1996 sales of $7.1 billion. It employs 37,500 people in more than 50 plants worldwide. In February, Levi eliminated 1,000 jobs in an effort to cut $80 million in costs.
“It’s like a battleship that’s taking on water,” said Alan Millstein, editor and publisher of Fashion & Network Report, an industry newsletter. “Through the ‘90s they’ve been battling.”
That’s due in large part to rising competition in the jeans market, analysts say. Not only have high-end designers such as Ralph Lauren and Tommy Hilfiger cut into sales, but consumers also like less expensive private-label jeans available at retailing giants such as Sears, Roebuck & Co.
“A lot of people can buy jeans for less than Levi’s is offering them at and get the same quality,” said Kurt Barnard, a retail consultant and president of Barnard’s Retail Trend Report.
Officials at Levi, which operates 32 plants in the U.S. and five in Canada, said the closures will be completed by the end of the year. They remained adamant that they will not be creating manufacturing jobs in Mexico or Southeast Asia, where the company already has plants.
“It’s a U.S. capacity problem,” Power said. “None of these jobs are moving overseas.”
The plants include one each in Fayetteville and Harrison, Ark.; Albuquerque and Roswell, N.M.; and Centerville, Tenn.; as well as a sewing plant and a finishing center in Knoxville, Tenn., and four plants in Texas--one in San Angelo and three in El Paso.
Levi Strauss, one of the oldest companies in California since it began making 501 button-fly jeans for gold miners in 1887, will spend $200 million in severance and other employee benefits. Workers affected by the job cuts will get eight months’ paid notice and up to three weeks’ severance pay for every year of service.
Sewers at Levi’s 1,800-employee finishing plant in Knoxville were told to turn off their machines Monday morning as a voice over the public address system said, “We have some devastating news . . . “
“It was hard even sitting at your machine today,” said Willie DeLaney, who has worked at the plant for a dozen years.
“People all around were crying,” worker Marjorie Gates said.
They praised Levi’s severance package, with its extended benefits and job counseling.
U.S. Labor Secretary Alexis Herman also said that federal officials will help laid-off workers with job assistance and retraining. In addition, the Levi Strauss Foundation plans to spend $8 million in grants to affected communities.
“It’s a big blow, but Roswell is resilient,” said Tom Jennings, mayor of the southeastern New Mexico town, which has about 48,500 residents and will lose 567 jobs. " . . . The community has seen adversity before, and it’s come back from it.”
In June 1996, Levi offered to reward each of its 37,500 employees with a one-time bonus equal to about a year’s pay if the company met performance goals over a six-year period. At the time it was considered one of the largest employee incentive programs ever.